Why Pay Transparency Demands a Total Rewards Lens

Why Pay Transparency Demands a Total Rewards Lens
Workforce

11 of 12

This insight is part 11 of 12 in this Collection.

July 23, 2025 7 mins

Why Pay Transparency Demands a Total Rewards Lens

Pay Transparency Drives a Cultural Mindset Shift

Pay transparency is more than another regulatory mandate. It’s a foundational shift in how leading organizations are building resilient cultures and future-ready workforces — especially as scrutiny extends beyond base pay.

Key Takeaways
  1. Four out of five global firms are not ready for pay transparency legislation — leaving risk exposure and lost opportunity on the table.
  2. A data-driven, total rewards approach transforms transparency from regulatory minimum to strategic differentiator.
  3. Tomorrow’s workforce expects more: clear communication, equitable opportunity and a rewards package that reflects their true value.

Much of the conversation around pay transparency has focused on compliance with the patchwork of global laws and regulations, especially in the EU and U.S. But this is just the tip of the iceberg. Companies that go beyond compliance to shift their mindset toward culture and equity will gain the strategic advantage.

Pay is no longer the only component of total rewards. Insured benefits, pension and retirement savings, transportation allowances and other ancillary benefits are included in the EU Pay Transparency Directive and will be scrutinized under the broader umbrella of pay transparency.

These recommendations can help companies embrace pay transparency as an opportunity to go beyond compliance and lead with a total rewards mindset.

Pay Transparency Checklist

Global regulatory complexity means most organizations are behind the curve. There are three dimensions of preparedness to consider:

1. Readiness: How prepared are organizations for pay transparency?

  • 19%

    of respondents say they are ready for pay transparency.

    Source: Aon Pay Transparency Readiness Survey 2025

  • 29%

    report their level of preparedness has not improved in the last 12 months.

This lack of preparation may in part be due to employer procrastination, as putting time and resources toward future initiatives can be challenging. Others may be waiting to make changes on the assumption that the regulations will be altered or scrapped.

Pay transparency can also mean different things in different jurisdictions. In the U.S., the patchwork of existing state and local laws relate to reporting requirements, while others focus on salary ranges in job postings. The main aspects of pay transparency in the EU include salary ranges and the criteria for pay differences and reporting requirements, all of which will be determined by legislation passed individually in EU member states.

While there are countries in the EU, such as the Netherlands and Poland, there is uncertainty around what final legislation will look like. In addition, how pay transparency will fit with existing equity regulations in certain countries like France, Spain and Portugal has yet to be determined. In Germany there are still existing pay transparency regulations that need to be updated to comply with the EU Directive.

A Pay Transparency Readiness Assessment Helps Employers Prepare

A Pay Transparency Readiness Assessment Helps Employers Prepare

The best way to understand if an organization is ready for pay transparency is do a pay transparency readiness assessment.

This starts with a qualitative review of HR and reward policies, processes and strategy that measures preparedness in relation to applicable mandates.

Next is a quantitative review of employee data and estimation of pay gaps aligned to category of workers and reporting that drives discussions around potential business implications to help identify focus areas.

The final step is the development of a roadmap to help employers prioritize what interventions are needed and their timing.

2. Priorities: What are the top ways to achieve pay transparency?

Fewer than one in five firms globally and one in 10 in Europe have an established approach to reporting pensions and benefits. When asked to rank activities in order of priority, pension and benefit reporting ranked last out of 11.

Quote icon

The best time to start preparing for pay transparency is two years ago. The second-best time is now. It takes vision — in addition to compliance — to future proof your reward strategy.

Rebecca Warnken
Benefits Leader, Health Transformation, Health Solutions, North America
3. Communication, Compliance and Reporting: How developed are communication strategies and company awareness?

Employers may be underestimating the difficulty of communicating pay gaps and their plans to mitigate them. Managers will need to be prepared to hold meaningful and productive conversations with employees about pay, perhaps for the first time outside of an annual review setting. Organizations will need robust training for this step to be successful.

“The first point of contact for most employees is going to be their immediate supervisor,” says Alessandro Linari, an Associate Partner in Aon's Talent Solutions practice in Europe, the Middle East and Africa. “And that supervisor is going to need training on how to discuss this with an employee when neither of them are accustomed to conversations about pay.”

Beyond one-on-one communications, employers will need to be ready with mass communications, including FAQ documents and total rewards communication toolkits. Communicating at scale leaves more room for misunderstanding. Clearly stating the company’s values and plan to provide equitable compensation needs to be the centerpiece of a messaging plan. 

Approaches to Developing a Pay Transparency Strategy

Pay transparency is creating a new opportunity for employers to lead with their commitment to equity, ability to attract and retain talent and solve an issue that has plagued employers for a long time. But for organizations to do that, they must approach it with a total rewards mindset.

Minimum Compliance: The minimum that employers need to carry out to be compliant with the EU Directive and other regulations includes data collection of the cost of employer-funded benefits, understanding the impact of benefit arrangements on the pay gap and communicating results in line with pay transparency compliance. This is itself no small task. Companies may have multiple benefit plans in each affected country with disparate data sources and varying eligibility criteria. With regulations going into effect soon, even those employers who want to do minimum compliance should move quickly to prepare.

60%

of organizations said they are taking a geographically targeted approach to pay transparency, only where compliance is required.

Source: Aon Global Pay Transparency Study, 2025

Most companies are focused on minimum compliance. When asked if they are going beyond compliance, only a quarter of companies in Asia Pacific, just under 40% in Europe, the Middle East and Africa, and about half of respondents in North America and Latin America say they are.

Total Rewards Mindset: Companies will gain the most advantage if they strive for equity in benefit outcomes. Achieving this total rewards mindset requires a deep-dive data analysis of benefits, combining different sources of data to provide additional insights. This can form a starting point for changes to benefit design, communication strategies or wider total rewards policies. Key advantages of this approach include:

  • Better employee understanding of the total rewards package, which aligns employer objectives with employee preferences and needs
  • Fairer and more consistent approaches to benefits, leading to reduction in disparities and improving productivity and retention
  • A stronger company culture, giving employers a competitive advantage

Where to Start: Proactive Steps

Pay transparency is a catalyst for wider transformation. It’s a rare opportunity to turn necessary compliance issues into strategic advantage, transforming the employer-employee relationship and strengthening the employee value proposition. Adopting a total rewards mindset will accelerate business resilience while reinforcing talent attraction.

Ready to move beyond compliance and future-proof your rewards strategy? Let’s discuss how a tailored readiness assessment unlocks actionable insight for your organization. Contact our team to start the conversation.

Aon’s Thought Leaders

Chris Byne
Partner, Talent Solutions, United Kingdom

Catherine Engelhardt
Associate Partner, Wealth Solutions, United Kingdom

Aria Glasgow
Partner, Talent Solutions, North America

Grace Lattyak
Partner, Wealth Solutions, North America

Alessandro Linari
Associate Partner, Talent Solutions, Europe, the Middle East and Africa

Céline Ng Tong
Global Business Development Director of Global Benefits, Health Solutions, United Kingdom

Anthony Poole
Partner, Talent Solutions, Europe, the Middle East and Africa

Annelieke van Mens
Managing Director of Global Benefits, Health Solutions, Europe, the Middle East and Africa

Rebecca Warnken
Benefits Leader, Health Transformation, Health Solutions, North America

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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